Hibiscus Petroleum Berhad (KLSE:HIBISCS) Passed Our Checks, And It's About To Pay A RM00.015 Dividend

Readers hoping to buy Hibiscus Petroleum Berhad (KLSE:HIBISCS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Hibiscus Petroleum Berhad's shares before the 25th of September in order to be eligible for the dividend, which will be paid on the 25th of October.

The company's next dividend payment will be RM00.015 per share, and in the last 12 months, the company paid a total of RM0.075 per share. Based on the last year's worth of payments, Hibiscus Petroleum Berhad has a trailing yield of 3.5% on the current stock price of RM02.16. If you buy this business for its dividend, you should have an idea of whether Hibiscus Petroleum Berhad's dividend is reliable and sustainable. So we need to investigate whether Hibiscus Petroleum Berhad can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Hibiscus Petroleum Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hibiscus Petroleum Berhad paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 29% of its free cash flow in the past year.

It's positive to see that Hibiscus Petroleum Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Hibiscus Petroleum Berhad's earnings per share have been growing at 11% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hibiscus Petroleum Berhad has delivered 32% dividend growth per year on average over the past four years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Should investors buy Hibiscus Petroleum Berhad for the upcoming dividend? It's great that Hibiscus Petroleum Berhad is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

So while Hibiscus Petroleum Berhad looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Hibiscus Petroleum Berhad you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.